Review Essay by Knick Harley, Department of Economics, University of Western Ontario.

Foundations of British Quantitative Economic History Phyllis Deane and W. A. Cole’s British Economic Growth, 1688-1959, first published in 1962, with a somewhat revised second edition in 1967, was the seminal work for a generation of economic historians, primarily, of course, of Britain but also for those working on other economies. Its influence was enhanced by the simultaneous publication of British Historical Statistics, edited by Brian Mitchell with Phyllis Deane, which presented the basic statistical raw material that lay behind the study along with detailed discussion and evaluation of the sources. The book stimulated those, like Max Hartwell, who shortly thereafter brought explicit economic models and statistical techniques to the study of British economic history, methodologically joining the ‘cliometricians’ in the United States. The basic quantitative outline Deane and Cole established also influenced more skeptical traditional economic historians even though these scholars rightly emphasized Deane and Cole’s own cautions about the speculative nature of many of the numbers and “were dubious of the basic methodology of (the) approach and . . . suspect(ed) that attempts to analyse the origins and causes of economic growth through the media of national income aggregates runs the risk of obscuring the significant factors, because the experience of the pre-industrial economy does not fit naturally into the conventional national income matrix” (p. xx). Today, although many specific estimates have been superseded — by research largely stimulated by Deane and Cole’s pioneering work (most obviously work on historical national income by Charles Feinstein, as well as by Peter Lindert, N.F.R. Crafts and myself on aggregate income prior to 1840, and by Sir Anthony Wrigley, Roger Schofield and their associates on demography) — Deane and Cole’s volume remains a required text for anyone working on the aggregate British economy over the past three centuries. Our picture of the aggregate growth of Britain during the Industrial revolution has changed significantly over the past few decades, but still rests fundamentally on Deane and Cole’s evidence and analysis. They provided an example of how quantitative economic history should be done, with the exhaustive and careful collection and aggregation of data from a wide range of sources. They saw themselves as historians in a continuing tradition and did not preach a new methodology or exalt the economist’s methodology over that of the historian. Their work set the framework on which traditional social and economic historians and historically minded economists have built.

Deane and Cole identified the key role of the national income estimates in the introduction to the second edition. “It is not possible to study economic growth without some sort of quantitative yardstick to indicate the timing, directions and pace of economic change at the national level (p. xx).” They set themselves the task of providing a broad outline of British national income and the breakdown of the sectoral distribution of value added and of the uses of output over three centuries. In a way, of course, they were following in Sir John Clapham’s footsteps and attempting to see the development of the British economy as a whole rather than concentrating only on the spectacular changes. By the 1950s national income accounts provided an obvious framework for such an overall view. Deane and Cole’s main research focused on the years before 1870 since other researchers had compiled estimates of income and several of its components for the later years. The estimates, and the detail of economic structure that they embody have provided an indispensable basis for the general equilibrium perception of economic development. In recent years the data have also provided the basis for explicit models that have attempted to use the computational power of modern computers to explore causal relationships in the industrial revolution.

Deane and Cole’s quantitative overview of British growth revised somewhat the prevailing picture of British industrialization. Traditional accounts had often emphasized the 1760s and 1770s as key decades of the beginnings of economic growth. Deane and Cole, however, found no discontinuity in those decades but rather accelerations in the 1740s and then in the last two decades of the eighteenth century. An industrial revolution, although somewhat delayed, survived in their estimates. Not only did per capita growth accelerate at the end of the eighteenth century, rapid growth, accompanied by rapid structural change in the economy, continued in early decades of the nineteenth century before slowing in the century’s middle third. Growth accelerated again in later decades of the century only to slow again at the end of the century. In the 1950s, when they conducted their research, the pattern of the twentieth century remained obscure. Late twentieth century growth still lay in the future.

From our present vantage, the book’s crowning achievement lies in its nineteenth-century income estimates. These are presented in Chapter IV “Changes in the Industrial Distribution of the Labour Force and Employment Incomes in the Nineteenth and Twentieth Centuries” and Chapter V “The Changing Structure of National Product.” These two chapters present estimates of National Product by sector of origin for nineteenth-century census years. The key numbers appear in their Tables 34 and 37. The decennial censuses collected data on individuals’ occupations, with reasonable success after 1841. This information provided the raw material on which, with the aid of wage data, they estimated labor income by broad sectors of the economy. Unfortunately the occupational material is deficient prior to 1841 so labor incomes in the first three nineteenth century benchmarks involve extensive extrapolation from later data. They complemented the census-based labor income estimates with income-tax-based estimates of property income. The income tax, both between 1799 and 1815 and after 1842, provided assessment information from which property income by broad sectors could be estimated, with varying degrees of difficulty. Combining the two sources resulted in current price estimates of national product at benchmark years. Deane and Cole were keenly aware of the limitations and approximations in the estimates and cautioned the reader extensively on the approximate nature of the income estimate. Nonetheless, the estimates have retained their general usefulness for more than a generation supplemented, of course, by Charles Feinstein’s work that has provided extensive revision and amplification.

Deane and Cole paid at least as much attention to the changing economic structure that their estimates revealed as they did to the aggregate figures of national income. They constantly considered questions of the relationship between growth and structure. In particular, they emphasized the rapid decline of agriculture in the decades around 1800, the rise of manufacturing and of services that occurred rather more unevenly, and the late nineteenth century important increase in income from abroad.

Chapter VI “The Growth of the Nineteenth-century Staples” extends the quantitative information by surveying the leading industries of the industrial revolution. The chapter retains the careful quantitative focus that characterizes the work, compiling estimates of value-added in the textile, mining, iron and transport industries. This serves to supplement and amplify the census-based aggregate estimates, providing more detailed estimates of the change in economic structure that accompanied nineteenth-century growth. Without the census-based benchmarks, however, the estimates would have limited value since it would be impossible to place the industries within the context of aggregate output. With the aggregate benchmarks, the industry studies provide an extremely useful, finer breakdown of parts of the manufacturing sector.

The sector studies, which give due consideration to each industry’s relative contribution to national income, raise some potential challenges to the conclusions of the indices of national income growth, which Deane and Cole do not address. In contrast to the national income figures, which show growth accelerating in the last years of the eighteenth century and then slowing by 1830, the industry studies show that these ‘leading sectors’ had their greatest impact during the railway age. Furthermore, the estimates of the growth of the ‘leading sectors’ between 1770 and the second quarter of the nineteenth century are considerably below the growth rates of the manufacturing aggregate suggested by the eighteenth-century index and the census-based current values of output deflated by a price index. Even the spectacularly growing textile sector increased more slowly than the estimated aggregate between 1770 and 1840. In particular, textile output increased by only a third between 1770 and 1800 while the index of manufacturing output in the national income index more than doubled. (Between 1800 and 1840 the textile index increased roughly six-fold while the estimated real output of the manufacturing sector increased about five-fold.) It is unfortunate that Deane and Cole did not make more of an attempt to reconcile these estimates.

Chapter VIII’s compilation of capital formation estimates also seemed to challenge the aggregate view of a rapidly growing industrial revolution followed by lower growth. Instead they also suggest that the railway age was the greatest discontinuity. In contrast to Walt Rostow’s assertion that capital formation increased rapidly during the traditional industrial revolution of the late eighteenth century, they find gradual acceleration over some seven decades between 1770 and 1840. If there was a discontinuity, it occurred during the railway age not at the time of the cotton spinning innovation.

When the book appeared, the estimates of national income for the eighteenth century and their implications for the timing and nature of the British industrial revolution probably commanded the most attention. Table 1 “The Social Accounts of England and Wales in 1688″ based on Gregory King’s estimate from government investigations of the late seventeenth century provides Deane and Cole’s starting point. Chapter II “The Eighteenth-century Origins” begins with an extensive, and somewhat discouraging, overview of the available data relating to economic activity in eighteenth-century Britain. This discussion remains required reading for anyone undertaking serious research in the period. The centerpiece of the chapter, however, is undoubtedly Table 19 “Index Numbers of Eighteenth-century Real Output,” which quickly became accepted as the quantitative indicator of the course of the industrial revolution. In retrospect, however, it is clear that users of the figures (sometimes including the authors themselves) at times failed to appreciate the implications of the indices’ construction adequately. Deane and Cole, of course, carefully laid out their procedures. The real output series aggregates five component series — agriculture, export industries, home industries, rent and services and government and defense — using weights reflecting the structure of the economy about 1700. All the series, except that for government spending, are proxies from available data. Although the rationale for each proxy is carefully justified, it becomes apparent that the real output series is in fact narrowly based. Population estimates provided the main trends for agricultural output (with an adjustment for international trade in grain) and the service sectors — together nearly three-quarters of the index in 1700. For manufacturing, Deane and Cole adopted two separate procedures. They constructed an index from excise data for non-traded industries but for the larger traded manufacturing sectors they adopted an index that consisted of the sum of the official values of imports and exports.

The final section of Chapter 2, entitled “The Mechanics of Eighteenth-century Growth” attempts to provide an explanatory sketch of eighteenth-century growth. The output index revealed an upsurge in growth in the 1740s and then “a considerably sharper upward trend appears in the 1780s and 1790s.” Deane and Cole attempt to explain the periods of acceleration by reference to underlying trends in population and trade. At times here, I feel that the reasoning comes perilously close to circular since the index is constructed from population and trade growth. In a simple mechanical sense, the index accelerates in the 1740s because the estimated rate of growth of population accelerates, providing an estimate of accelerated growth for the majority of the aggregate series. In the 1780s and 1790s the acceleration comes, arithmetically, from the acceleration of the growth of the volume of foreign trade. At times Deane and Cole seem to attribute causal features to population and trade and seem to lose sight of the index’s construction. The relationships they find may simply be the result of the construction of estimates. I frequently find myself wanting formal presentations of models in order to understand the mechanisms they had in mind. Overall this section, although ambitious, now seems relatively unsuccessful.

Chapter 3, “Industrialisation and Population Change in the Eighteenth and Early Nineteenth Centuries” is a tour de force in demographic history that anticipated the important role that demography was to play in the evolution of our understanding of the industrial revolution. Here Deane and Cole used data from the samples of eighteenth-century parish register vital events collected by Rickman in the early nineteenth-century retrospective collections and published in the censuses. Their exploration of population change at the county and regional level is of particular interest. Although they emphasize the crudeness of the data, it becomes apparent that regional divergence had been a principal characteristic of eighteenth-century population movements. London was, of course, a center of high death rates and immigration. Rather more interesting, however, was the evidence of systematic interaction between the economic and population growth in the industrial regions of the west Midlands and the North. Baptisms and burials revealed exceptionally high rates of natural increase in the industrializing North and particularly the North-west relative to rest of the nation. Despite the serious limitations of the underlying data, the conclusion that growth was a social phenomenon that interacted with demography is now widely supported by more robust evidence.

Chapters VII on the factor composition of national income and Chapter VIII on capital formation represented less original contributions. These relatively short chapters primarily summarize the work of others, bringing together and combining various series that had previously been available only for shorter periods. The discussion integrates this additional information about the changing structure of the British economy. The chapters highlight the underlying ambition of the work to present the available data in as comprehensive a manner as possible and continue to emphasize the relationship between growth and the structure of national income. The discussion set an agenda to which others responded.

British Economic Growth largely defined the territory of British economic history for a generation. It placed the discipline firmly into a framework of national income accounts and its components — the industrial structure of value-added, the distribution of income among factor owners and the disposition of income. In doing so it encouraged researchers to think about the industrial revolution and subsequent growth in general equilibrium terms. That alone would have made it a great book. In addition, it stimulated much of the most important research of the next decades. Much of that research has resulted in superior estimates of national income and its components that have superseded Deane and Cole’s original efforts. Deane and Cole must be proud to have provided such a stimulus. Finally, despite revisions by many scholars, their estimates continue to be important building blocks in on-going research. The reader might keep in mind, for example, how much Nick Crafts’ and my own work on the industrial revolution rests on Deane and Cole. Our revisions of the likely path of income growth during the industrial revolution, although substantially changing Deane and Cole’s picture of growth before 1840, depend fundamentally on their estimates of national income at current prices in the middle of the nineteenth century. Equally, our computational general equilibrium models rest on a social accounting matrix derived from their 1841 national income estimates.

It is hard to think of greater praise for a book than to note that it stimulated research for over a generation and that it remains a fundamental source after nearly half a century.

C. Knick Harley was the 1999 winner of the Cliometric Society’s annual prize — the Clio Can. Among his recent articles are “Computational General Equilibrium Models in Economic History and an Analysis of British Capitalist Agriculture,” European Review of Economic History (2001); “Simulating the Two Views of the British Industrial Revolution,” Journal of Economic History (2000), with N.F.R. Crafts; and “Cotton Textile Prices and the Industrial Revolution,” Economic History Review (1998).